Mercedes-Benz and Volkswagen are among four entities challenging a substantial £9.1 billion ($12.3 billion) consumer redress scheme imposed by Britain’s markets regulator on the UK motor finance industry. The scheme aims to compensate customers for historic motor loans that were deemed to have been missold over a 17-year period. This significant challenge could delay the Financial Conduct Authority’s (FCA) plans to distribute an estimated £830 per vehicle loan agreement, with payments initially hoped to commence this year.
Volkswagen’s financial services arm confirmed on Wednesday it had approached the courts to seek clarification on elements of the compensation plan, hours after Mercedes-Benz also confirmed its challenge. A spokesperson for Volkswagen Financial Services UK stated, “We support redress for customers who were genuinely disadvantaged, but it is also important that any scheme is lawful, fair and properly targeted.” The move has been described as “disappointing” by the FCA, which confirmed three lenders and a consumer group were challenging the redress designed to finalise a long-running scandal.
The compensation scheme targets cases where lenders paid inadequately disclosed commissions to motor dealerships, or where contractual ties between lenders and dealerships were not transparent to customers. While major banks like Lloyds and Barclays are not contesting the scheme, Santander UK, the British arm of the Spanish bank, set aside an additional €207 million ($242.2 million) this week to cover potential redress costs. BMW, another significant vehicle manufacturer, told Reuters it disagreed with some aspects but believed the scheme offered the “fastest and easiest route to resolution for customers.” Concurrently, consumer group Consumer Voice has also filed a legal challenge, arguing the FCA’s scheme “systematically undercompensates consumers.”
